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Director and shareholder in contempt of court after selling assets

Posted: 4th May 2012   In: Corporate Commercial

A director and a shareholder were held to be in contempt of court after selling company assets.

The case involved an agency that sold car breakdown policies on behalf of an insurance company.

The insurers came to believe that the agency had not accounted fully to it for its premiums and had provided false information. It began legal proceedings and obtained an interim injunction preventing the agency from disposing of its assets.

However, within a week of the injunction being granted, the insurers alleged that the agency had transferred all its assets to a new business. The transfer included everything from its website and its premises and staff.

The insurers considered that everything of value had been moved out of the agency. This meant that any judgment against the agency would be worthless as it wouldn’t have any assets.

The court held that the actions of both the director and the shareholder constituted a wilful interference with the injunction.

The judge also pointed out that a company director could be in contempt not only for what he did, but also for what he failed to do. A director had a duty to take steps to ensure that a court order was obeyed. If he wilfully failed to those steps, as in this case, he could be punished for contempt.

Therefore, a director could be liable for civil contempt in this specific way without necessarily being in contempt under general law.

Please contact Jon Alvarez if you would like more information about the issues raised in this article or any aspect of company law.